Kenyan Shilling Heads for 9-Month Losing Streak on Lower Yields

Kenya’s shilling slumped for the seventh straight day, its longest losing streak in nine months, as falling yields on government securities damps investors’ appetite.

The currency of East Africa’s biggest economy retreated as much as 1 percent and traded 0.5 percent weaker at 84.30 per dollar as at 2:35 p.m. in Nairobi. A close at that level would be the longest run of losses since August.

“The falling yields on government securities have undermined the shilling on reduced inflows form investors who were targeting the higher yields hence propping the shilling,” Raphael Agung, a dealer at Nairobi-based Commercial Bank of Africa Ltd., said on phone.

Kenya’s three- and six-month borrowing costs fell for the 17th straight week after the government cut the size of its weekly debt offering and halved its target for domestic debt purchases in this financial year.

Kenya has lowered its target for borrowing on the local market to 62.1 billion shillings ($736.6 million) for the fiscal year ending June 30, from a previous goal of 119.5 billion shillings. The country will replace the local financing with a $600 million syndicated loan arranged by Citigroup Inc., South Africa’s Standard Bank Group Ltd. and London-based Standard Chartered Plc, which was signed yesterday.

Treasury Yield

The yield on the 91-day Treasury bills declined to 11.381 percent at last week’s sale from a high of 20.799 percent at a sale on Jan 12, while the yield on 182-day bills declined to 13.076 percent at a sale on May 9, from a high of 20.914 percent realized on Jan 23, according to the Central bank website. The government has offered for sale 2 billion shillings of 6-months treasury bills at today’s auction.

Kenya has offered 3 billion shillings in its one-week repurchase agreements auction today, an official of the bank who declined to be identified in line with policy said in a phone interview from the capital today.

“The mop up action by the central bank is largely for short term liquidity management hence not expected to prop up the shilling,” Agung said.

Kenya’s government signed a $600 million two-year loan accord with three foreign banks at 475 basis points above the London interbank offered rate, Standard Bank Group Ltd. said.

“We expect the loan, which will be in foreign currency, to assist in the stabilisation of the shilling and building up of the foreign-currency reserves,” Njeru Githae, minister of finance, said yesterday.

Tanzania’s shilling weakened 0.4 percent to 1,585 per dollar, while the Ugandan shilling strengthened less than 0.1 percent to 2,488 per dollar.

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